MEDIA

MEDIA; Post-Mortems for a Media Deal Undone

By DAVID CARR

Published: December 22, 2003

Last Monday, Donny Deutsch, the advertising executive, and Michael Wolff, the often-caustic media columnist, were the toast of the New York Magazine Awards at the Four Seasons restaurant. Seated at a table along with Caroline Miller, editor in chief of the magazine, and Senator Hillary Rodham Clinton, the two men, visible representatives of Mortimer B. Zuckerman's much-followed bid to buy New York, found themselves accepting early congratulations for their seemingly inevitable victory.

What Mr. Deutsch and Mr. Wolff did not know was that Ms. Miller had spent five hours the night before, along with other executives at the magazine, briefing a less outspoken bidder.

The bidder, Bruce Wasserstein, a longtime Wall Street deal maker, swooped in and took the magazine off the auction table with a $55 million bid -- more than $10 million over the Zuckerman offer -- leaving the Zuckerman team wondering where their bid had gone astray.

Mr. Zuckerman and his partners -- Mr. Deutsch, the investor Nelson Peltz, the film executive Harvey Weinstein and the money manager Jeffrey Epstein -- had campaigned publicly and confidently for the magazine, openly speculating about the changes to come once they took over.

Such behavior made their resulting empty-handedness all the more remarkable. No doubt a hefty serving of crow, with a side dish of comeuppance, will fuel much table talk in coming weeks among New York City media watchers.

The members of the Zuckerman team have blamed what they say was a fickle auction process, where they were not allowed to respond to a higher bid in a second round. But in a telephone interview on Friday, Mr. Zuckerman played down the significance of the loss.

''I don't mean to sound casual,'' he said, ''but anybody who has been active in business knows that you win some and you lose some. You'd like to win every one, but we are all grown-ups.''

Mr. Zuckerman's strategy of joining up with many of the moneyed individuals interested in the magazine and then low-balling the owner, Primedia Inc., had seemed like a savvy move. None of the biggest magazine-publishing companies, like Time Inc. and Condé Nast, were pursuing New York, mainly because its size (about 440,000 circulation) and reliance on regional advertising did not mesh with their other properties.

But it soon became apparent that others with money wanted the magazine badly. In the end, the Zuckerman bid came in third, behind Mr. Wasserstein's and that by CurtCo Robb Media, a West Coast publisher of luxury magazines including The Robb Report. Only American Media, the publishers of tabloid newspapers like The National Enquirer and enthusiast magazines like Shape, submitted a lower bid.

Mr. Zuckerman responded emphatically when it was suggested that he had played the wrong cards. ''We made it clear that we were willing to put more money on the table,'' he said, ''but after they had a handshake, they were not willing to entertain other offers. It was inconsistent with the normal bidding process.''

''Best and final'' bids were due on Dec. 11. Mr. Zuckerman and his team submitted a bid for $44 million and waited for a response from Allen & Company, which ran the auction. Meanwhile, Mr. Wasserstein submitted a bid above $50 million and then sent a team to conduct further due diligence on Sunday. After a day of negotiations on Monday, a deal in principle took shape and the deal makers shook hands on Tuesday.

Mr. Deutsch, the chief executive of Deutsch Inc., maintained that being in the game was as important as winning.

''We were laughing our way through the meetings, having a great time along the way, so I don't think there are going to be any tears in the end,'' he said. ''We might have played it too cute in the bidding process, but then again it might have been wired from the start. It's not really that big of a deal.''

If the property in play represented a different city, perhaps that comment could be taken at face value. After all, New York barely makes any money -- about $1 million in profit on revenue of about $43 million last year.

''Certainly, if you look at it from any business point of view, it is insignificant,'' said John Huey, editorial director of Time Inc. ''But because it is New York, with the New York media covering the sale of New York magazine, it takes on an aura that defies all logic.''

And the loss of face after the public posturing seems very real. The motives behind the bid in the first place -- ego, power and cachet -- have been dented by the failed effort.

''These kind of players like to continually prove they are vital,'' said Jeffrey A. Sonnenfeld, associate dean for executive programs at the Yale School of Management. ''What was motivating this deal was not a good financial outcome, but a demonstration of power. If it was no big deal, they would not have gotten involved in the first place.''

''These are media mammoths at play,'' he added, ''and the dream team just lost.''

Mr. Wolff, the media columnist for New York magazine who inserted himself into the process by rounding up investors like Mr. Epstein and Mr. Deutsch, writes a great deal about mogul semiotics. He was blunt in his self-assessment.

''We got outplayed,'' Mr. Wolff said. ''The idea of bringing together many interested parties seemed like a good idea, until it turned out to be a bad idea. It was less efficient than doing it with just one guy.''

Although there was plenty of immediate speculation that Mr. Wasserstein would soon rid the magazine of a man who nominally competed against him, Mr. Wolff said he had no concerns about working for the victor.

''I haven't spoken to the new owner, but I don't think I am tainted by my involvement,'' he said. ''At some point, it is all just fodder for the column.''

Meanwhile, as Mr. Wasserstein and Primedia work to put the finishing touches on the deal, Mr. Wolff has resumed his customary table at Michael's restaurant, and his role as a well-paid observer of the New York media world is little changed. But some of the people he has written about seem to be enjoying that his trip through the looking glass of the world he covers has come to naught.

Steven Rattner, a principal of the Quadrangle Group, a media investment firm, who has been at the receiving end of Mr. Wolff's occasionally brutal commentary, thinks that Mr. Wasserstein's victory will have practical implications.

''Bruce is a very serious person and my guess is that he bought this to do very serious things,'' he said. ''The problem with New York magazine is that it has not been a serious publication for a number of years, and my prediction is that you will see significant changes.''

But Gil Schwartz, a CBS executive who chronicles the byways of business power as Stanley Bing in his column in Fortune magazine and in a recent book, ''The Big Bing,'' thinks the collective pratfall will disappear quickly for the principals involved.

''They are all very busy people and I think they will be happy moguling away very soon,'' he said. ''Being in the hunt is at the core of being a mogul. They made an offer that they thought was appropriate and someone came in with a little richer bid, so no harm, no foul. I think everybody can walk away from this with their self-aggrandizing instincts intact.''

Photos: Michael Wolff, left, New York magazine media columnist, says his group's losing bid to buy the magazine will at some point be ''all just fodder for the column.'' (Photo by Marilynn K. Yee/The New York Times)(pg. C8); Harvey Weinstein, left, of Miramax, and the publisher Mortimer Zuckerman bid to no avail for New York magazine. (Photo by Dimitrios Kambouris/WireImage.com)(pg. C1)